Growth and Payment Adequacy of Medicare Postacute Care Rehabilitation

In the early 1990s, Medicare experienced rapid growth in the number of providers furnishing postacute care (PAC). Spending grew at an even faster pace than the supply of providers. By the late 1990s, the U.S. Congress required the Centers for Medicare & Medicaid (formerly the Health Care Financing Administration) to design and implement prospective payment systems (PPSs) for the 4 PAC settings. Congress intended that the new payment systems moderate growth in spending for PAC. Instead, prospective payment generally has accelerated growth in spending and generated high profits among providers. This article presents growth trends in providers and Medicare spending. It discusses the Medicare Payment Advisory Commission's (MedPAC) assessment of payment adequacy for 2006 and 2007 for the 4 postacute sectors and problems with the PPSs that result in misaligned payments and costs. This article also reviews MedPAC's studies to compare patient-assessment instruments for 3 of the 4 settings and to compare outcomes across settings for joint-replacement patients.